Price Drift Before U.S. Macroeconomic News: Private Information About Public Announcements?

68 Pages Posted: 12 May 2016

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Alessio Sancetta

University of London, Royal Holloway College - Department of Economics

Georg Strasser

European Central Bank (ECB) - Directorate General Research

Marketa Wolfe

Skidmore College - Department of Economics

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Date Written: May 11, 2016

Abstract

We examine stock index and Treasury futures markets around releases of U.S. macroeconomic announcements. Seven out of 21 market-moving announcements show evidence of substantial informed trading before the official release time. Prices begin to move in the "correct" direction about 30 minutes before the release time. The pre-announcement price drift accounts on average for about half of the total price adjustment. These results imply that some traders have private information about macroeconomic fundamentals. The evidence suggests that the pre-announcement drift likely comes from a combination of information leakage and superior forecasting based on proprietary data collection and reprocessing of public information.

Keywords: Macroeconomic news announcements; financial markets; pre-announcement effect; drift; informed trading

JEL Classification: E44, G14, G15

Suggested Citation

Kurov, Alexander and Sancetta, Alessio and Strasser, Georg H. and Wolfe, Marketa, Price Drift Before U.S. Macroeconomic News: Private Information About Public Announcements? (May 11, 2016). ECB Working Paper No. 1901. Available at SSRN: https://ssrn.com/abstract=2778549

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Alessio Sancetta

University of London, Royal Holloway College - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom

Georg H. Strasser

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstra├če 20
Frankfurt am Main, 60314
Germany
+496913441416 (Phone)

Marketa Wolfe

Skidmore College - Department of Economics ( email )

815 N Broadway
Saratoga Springs, NY 12866
United States
+1-518-580-8374 (Phone)

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